Exam 3 Chapter 12 ( Limited Partnerships & Limited Liability Partnerships )

Dissolution of a Limited Partnership

- At the end of the life of the limited partnership as specified in the certificate of limited partnership. - With the written consent of all general and limited partners. - Because of the withdrawal of a general partner. - With the entry of a decree of judicial dissolution

Distribution of Assets

- Creditors of the limited partnership - Partners with respect to • Unpaid distributions • Capital contributions • The remainder of the proceeds

Name of Limited Partnership

- The firm name of a limited partnership may not include the surname of a limited partner unless: 1. it is also the surname of a general partner, or 2. The business was carried on under that name before the admission of the limited partner. - The name must contain without abbreviation the words limited partnership - States can designate the words that cannot be used in limited partnership names

Admission of New Partners

A new limited partner can be added only upon the written consent of all partners. - Agreement can provide otherwise. • Admission effective after amendment filed.

Limited Liability Partnership

A special form of partnership where all partners are limited partners and there are no general partners. No partners are personally liable; all have limited liability

Liability of General and Limited Partners

General partners - unlimited liability Limited partners - only up to amount of their capital contributions.

Participation in Management

General partners- management rights. • Limited partners - give up these right in exchange for limited liability.

Limited Partnerships

Have both general and limited partners

Liability Insurance Required

Many state laws require LLPs to carry a minimum of $1 million of liability insurance that covers negligence, wrongful acts, and misconduct by partners or employees of the LLP.

Formation of Limited Partnerships

Requires public disclosure. • Entity must comply with the statutory requirements of the RULPA or other state statute

Share of Profits and Losses ( limited partnership)

The limited partnership agreement may specify how profits and losses are to be allocated among the general and limited partners. • If there is no such agreement, RULPA provides that profits and losses from a limited partnership are shared on the basis of the value of the partner's capital contribution

Right to Information

The limited partnership must also keep the following records at its principal office: - Copy of certificate of limited liability and all amendments thereto - List of the full names and business addresses of each partner - Copies of effective written limited partnership agreements - Copies of federal, state, and local income tax returns - Copies of financial statements for the three most recent years.

The Revised Uniform Limited Partnership Act ( RULPA)

comprehensive law for the formation, operation, and dissolution of limited partnerships

Limited Partnership - Limited Partners

invest capital, but do not participate in management and are not personally liable for partnership debts beyond their capital contribution.

Limited Partnership - General Partners

invest capital, manage the business, and are personally liable for partnership debts.

Winding-Up a Limited Partnership

Certificate of cancellation must be filed by the limited partnership with the secretary of state of the state in which the limited partnership is organized.

Limited Partnership Agreement

Document that sets forth: - The rights and duties of the general and limited partners; and - The terms and conditions regarding the operation - dissolution and termination terms. • If no agreement, certificate serves as articles.

Certificate of Limited Partnership

Document that two or more persons must execute and sign. - Contains name of limited partnership, purpose, names and addresses of partners, agent, and principal place of business, contributions of each partner. - Must be filed with secretary of state. - Not formed until certificate filed.

Articles of Partnership

LLP's must be created formally by filing articles of partnership with the secretary of the state in which the LLP is organized.

Liability on Personal Guarantee

When an extension of credit from a bank, supplier, or other creditor is not approved based on the credit of the limited partnership, the creditor my require a limited partner to guarantee the repayment of the loan in order to secure repayment. • Creditor may enforce personal guarantee if limited partnership defaults.